Business Central Specific Cost

Business Central Specific Cost

About Specific Cost (general)

The costing method determines if an actual or a budgeted value is capitalized and used in the cost calculation. Together with the posting date and sequence, the costing method also influences how the cost flow is recorded.

The specific cost criterion aims to individually evaluate the inventories, purchased or produced, determining the relative cost separately”

An item’s unit cost is the exact cost at which the particular unit was received; In production or trade of easily identifiable items with fairly high unit costs.

  • For items that are subject to regulation
  • For items with serial numbers

 

Specific Cost – Testing case

Costing methods make an assumption about how cost flows from an inventory increase to an inventory decrease. However, if more accurate information about the cost flow exists, then you can override this assumption by creating a fixed application between entries. A fixed application creates a link between an inventory decrease and a specific inventory increase and directs the cost flow accordingly.

For items using the Specific costing method, inventory decreases are valued according to the inventory increase that it is linked to by the fixed application.

The following table shows how inventory decreases are valued for the Specific costing method.

ENTRIES

Posting Date

Quantity

Cost Amount (Actual)

Applies-to Entry

Entry No.

02-01-20

-1

-20.00

2

4

03-01-20

-1

-10.00

1

5

04-01-20

-1

-30.00

3

6

 

EXAMPLES

In the example just shown, the value of the inventory would be equal to:

(10 * 90) = 900 € if the inventories consisted of products purchased on 24/04

(10 * 85) = 850 € if related to products purchased on 29/10, and so on

In the second case, if the remaining quantities were equal to 60 we will have:

(25 * 90 + 35 * 85) = € 5225 if the inventories were made up of products purchased on 24/04 (25 pieces) and 29/10 (35 pieces)

(50 * 90 + 10 * 85) = € 5350 if the inventories were made up of products purchased on 24/04 (50 pieces) and 29/10 (10 pieces), and so on

 

This method is “not easy to use” since it requires the possibility of correlating, without error, the inventories to the costs incurred for it.

For this reason, it can be adopted in the presence of non-interchangeable (non-fungible) products, or when it is possible to physically keep the different batches of goods in the warehouse physically separate.

Furthermore, although extremely correct, it is very rarely used, especially if you manage thousands of articles, as management becomes very complicated.

 

About Specific Cost (Microsoft Docs)

Specific

Specific Cost:

An item’s unit cost is the exact cost at which the particular unit was received.

In production or trade of easily identifiable items with fairly high unit costs.

For items that are subject to regulation.

For items with serial numbers.

https://docs.microsoft.com/en-us/dynamics-nav-app/design-details-costing-methods

 

Serial Number Tracking for Cost Specific

The specific costing method is intended for use with high value items and those that are produced or purchased one at a time, for example, large capital goods. Each item in the inventory will have its own specific cost; when we choose the “specific” costing method, we must also choose to use “serialized item tracking” (Serial Numbers).

NOTE: you must use serial number tracking if you are using the specific costing method (mandatory)

 

Inventory Setup

if necessary, use it as a default cost, you can activate the default on the specific cost in the Inventory Setup.

 

COST ENTRIES


Cost on Item Card


FAQ\ISSUES

Scenario – I have no serials!

The serial number is issued by ourselves. The problem is, we received and post the purchase invoice after we post the sales invoice, hence the Purchase Invoice date must be later than the Sales Invoice date, and we have to map the cost of the item in Sales Invoice to the specific Purchase Invoice. Can we update the serial no to a posted sales invoice?

NO! the process is incorrect in this case, follow the rules, and assign the correct serial number.

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